Articles

The news that city officials are lax in enforcing regulations governing
San Jose’s two cardrooms is troubling. But even more disturbing is the implication
that the city has become so dependent upon its cardroom money (estimated
to be $13 million in 1997) that there’s no real incentive to protect its
citizens be effectively overseeing high-stakes card games.

On a bright spring morning in 1991 the town of Bettencourt, Iowa, an
industrial city on the Mississippi River which had been hit hard by recession,
staged a lavish ceremony to celebrate the opening of the Diamond Lady, the
nation’s first modern, riverboat casino. As media people, politicians, and
citizens looked on, the actor Howard Keel, who 40 years before had played
a gambler in Showboat, rolled the ceremonial first dice. He won $5 and,
in the process, ushered in a new age of legalized gambling in America.

“GAMBLE-BABBLE”by Robert Goodmanpublished in The Washington
Post, November 12, 1995.

Throughout America, promoters have proposed gambling casinos as an magic
bullet for a host of economic problems. They promise to bail out Chicago’s
overbuilt hotel business; substitute for Gary, Indiana’s devastated steel
factories; counterbalance the effects of declining oil prices in Louisiana;
replace vanishing jobs in Connecticut’s defense industry; and provide work
for idle New England fishermen.

Most lawmakers who are trying to legalize casinos are ignoring what every
savvy poker player knows – the way to win is to have good information about
the other players’ hands. Their approach could make big losers of us all.

A Gambling Policy From Nowhereby Robert Goodman

Most lawmakers who are trying to legalize casinos are ignoring what every
savvy poker player knows – the way to win is to have good information about
the other players’ hands. Their approach could make big losers of us all.

Congress’ recent approval of a Gambling Impact Study Commission provides
a chance to collect some serious information. While state and local lawmakers
continue to tout partnerships with casino companies, there has, incredibly,
been little objective study of the real results of America’s gambling explosion.

Casinos are promoted as substitutes for Indiana’s dying steel industry;
for out-of-work Massachusetts’ fishermen; and for New York State’s troubled
vacation resorts. New York’s Governor George Pataki supports efforts to
put a constitutional amendment before voters to allow casinos in four areas
of the state and slot machines at eight race tracks, effectively transforming
them into casinos. Massachusetts’ Governor William Weld has similarly proposed
casinos at several locations and slot machines at all of state’s race tracks.

Massachusetts’ lawmakers rejected a proposed comprehensive study of casino
impacts, and instead simply asked how the Governor’s plan would affect lottery
revenues. Nearly all of New York’s gambling study task force are Pataki
appointed state agency heads – officials who are unlikely to take positions
contrary to their boss. Pataki’s own support of the referendum process raises
another serious question about the intention of producing objective research.

That Pataki’s chief 1994 campaign fund raiser, Charles Gargano, who now
heads the state’s business development agency, was formerly on the board
of directors of a casino management company, hardly supports the idea of
unbiased policy making.
Gargano reportedly still owns stock in the firm, Alpha Hospitality, although,
according to his spokesperson, the stock is in a blind trust. Alpha itself
was hired as a management company by the Mohawk tribe, which is attempting
to build a casino in an area designated by the referendum.

Instead of dubious studies and task forces, what’s needed is a serious
look at what gambling actually means to a state’s economic and social well-being.
Useful research would examine how much consumer spending is siphoned away
from other businesses by gambling, the new criminal justice costs, the rises
in bankruptcies, embezzlement, insurance fraud, suicides, child neglect
and other social problems that now plague casino states. It would examine
what happens to a state’s politics when governments shift from being regulators
of gambling to being promoters of gambling.

In many states, crime and compulsive gambling have soared since casinos
were introduced. US News and World Report reported this year that crime
rates in casino towns rose nearly 6 percent in 1994, while falling 2 percent
in the rest of the country. According to a 1995 report by the Minneapolis
Star Tribune, bankruptcies in Minnesota increased 20 percent since casinos
opened there.

Iowa and Louisiana introduced casino-style ventures in the early 1990s
and now face the costly problems of having more people with compulsive gambling
behaviors. In 1995, Iowa’s Department of Human Services found the number
of problem gamblers tripled since casinos were introduced. Louisiana now
has the highest recorded rate of problem gamblers in America – one in every
fourteen adults, according to a 1995 state-commissioned report.

While the costs of problem gambling are admittedly difficult to quantify,
the research available to us at the United States Gambling Study indicated
potentially staggering costs. Just a one percent rise in adult problem gamblers
in Massachusetts costs state businesses and taxpayers more than $450 million
a year. In New York State, the same small increase would cost about $1.4
billion.

So why the rush? The stakes are high, the odds of winning long, and the
consequences of losing potentially devastating. The new federal commission
makes the case for waiting even more logical.

The commission alone is no guarantee of a thorough study. Although the
American Gaming Association, the casino industry’s lobbying arm, failed
to stop the federal study, it succeeded in limiting the commission’s subpoena
power. The industry will likely try to further weaken the study by influencing
the commission’s makeup. But at the very least, a commission will focus
national attention on the gambling issue and encourage other researchers,
the media and lawmakers, to pay closer attention.

If new information confirms the casino promoters’ promises, there will
be plenty of time to bet on the luck business. But if the results are bleak,
we will have a better opportunity to change the game. It’s like they say
at poker – you’ve got to know when to hold ’em, and know when to fold ’em.

Throughout America, promoters have proposed gambling casinos as an magic
bullet for a host of economic problems. They promise to bail out Chicago’s
overbuilt hotel business; substitute for Gary, Indiana’s devastated steel
factories; counterbalance the effects of declining oil prices in Louisiana;
replace vanishing jobs in Connecticut’s defense industry; and provide work
for idle New England fishermen.

Their promotional campaigns focus on how much fun it is to play. They
don’t mention how much the players lose or how gambling encourages addictive
behavior, or the enormous costs it creates for the rest of society. And
mostly, they don’t talk about how the actual results have not matched the
promises.

A few years ago, Phil Satre, president of Harrah’s casinos, went so far
as to say that more “casino entertainment” would be a positive
step for equal opportunity, predicting that every man, woman and child in
America would soon live in a state with casinos in which there was “no
gender-based, race-based or physical barriers to access.”

For those in the gambling industry, the word “gambling” doesn’t
exist. They call it “gaming” and they call those of us who win
and lose money in their establishments “players,” never gamblers.
Put a theme park next to the casino and it becomes a “family entertainment
center.”

Lawmakers in Louisiana who supported riverboat casinos used the gaming
word to get around a prohibition against state-sponsored gambling. New York
State politicians argued that recently introduced electronic keno in bars,
restaurants and convenience stores, was nothing more than another lottery
game — not the creation of mini-casinos.

But the results of America’s gambling boom are quite different from the
Las Vegas economic model of many politicians’ dreams. Most of the country’s
new gambling is “convenience gambling” at local casinos, riverboats,
and mini-casinos at bars and convenience stores. It is the kind of gambling
which relies on local residents, not tourists, for the bulk of its customers.
As a result, rather than providing economic stimulation, it cannibalizes
the local economy.

In the process, instead of being the regulators of gambling, governments
are becoming its leading promoters. Instead of protecting their citizens,
they are now preying upon them.

The public costs of gambling show up in many ways. As consumer spending
is diverted into gambling from restaurants, movie theaters, sports venues,
bowling alleys, and clothing stores, these and other businesses lose jobs
and profits. And police departments, courts, and prison systems must now
deal with a whole new range of criminal activity, much of it caused by addicted
gamblers, who don’t pay their bills and taxes, write bad checks, embezzle
moneymoney and commit fraud.

A recent Wisconsin Policy Research Institute report concluded that the
social costs of problem gamblers in that state were running at more than
$160 million a year. An Iowa Department of Human Services research report
stated that problem gambling had more than tripled there since riverboat
casinos were legalized in 1989.

But even more disturbing than the financial costs are the human tragedies.
State and local governments are creating a climate in which many ordinary
people are being drawn into criminal activities which destroy their lives.
Durand F. Jacobs, a professor of psychiatry at California’s Loma Linda University,
found that most of the people who commit crimes to their support compulsive
gambling had no prior criminal records.
Jeffry Bloomberg, a South Dakota State’s Attorney, last year gave a Congressional
committee a devastating description of the impact of newly legalized casinos
on the town of Deadwood, S.D. “We have seen individuals who, prior
to their exposure to gambling, had no criminal history, who were not junkies
or alcoholics, many of whom had good jobs, who became hooked on slot machines
and after losing all their assets and running all credit resources to their
maximum began committing some type of crime to support their addiction.”

Bloomberg described a rise in child abuse and neglect cases seen by his
office – from children being left in cars all night while their parents
gambled, to families without groceries because they had gambled away their
pay checks. He told of a restaurant manager who embezzled $45,000; of a
book-keeper who committed suicide as the result of mounting gambling debts;
and of an Air Force sergeant with an exemplary military career who murdered
a casino operator after trying to retrieve the bad checks he had written.

Until recently, there was little organized opposition to the gambling
explosion. But now, citizens’ groups are becoming more organized and vocal,
and last year, the National Coalition Against Legalized Gambling held its
first national conference. Aided by this group, last year, voters turned
down casinos in every state-wide ballot proposals to legalize new casinos.
Despite unprecedented lobbying by the gambling industry, a Florida referendum
to legalize casinos was defeated by more than 60 percent. And in Rhode Island,
four ballot measures for casinos were decisively defeated.

In spite of increasing amounts of money being spent by the gambling lobby,
anti-gambling sentiment is growing. In Louisiana, for example, a 1995 state-wide
poll showed that nearly two-thirds of that state’s voters were more likely
to vote for a candidate who would cut back on gambling than one who supported
it.

Finally, the federal government has begun to pay serious attention to
the problem. Senators Paul Simon (D-Illinois) and Richard Lugar (R-Indiana)
and Congressmen John LeFalce (D-New York) and Frank Wolf (R-Virginia) have
recently introduced similar bills in Congress to create a national commission
to study the effects of gambling proliferation. The gambling industry, led
by the American Gaming Association, its recently created Washington lobbying
arm, is mounting a major campaign to defeat this legislation.

If the gambling industry believes it is just selling an innocent form
of family entertainment, why is it afraid of such a study? Is it possible
it fears that Congress will help the American people see through all the
gamble-babble and understand just how risky this bet really is?

On a bright Spring morning in 1991, the town of Bettencourt, Iowa, an
industrial city of the Mississippi which had been hard hit by recession
staged a lavish ceremony to celebrate the opening of the Diamond Lady, the
nation’s first modern, riverboat casino. As media people, politicians, and
citizens looked on, the actor Howard Keel, who, 40 years before, had played
a gambler in Showboat, rolled the ceremonial first dice. He won $5 and,
in the process, ushered in a new age of legalized gambling in America.

Over the next four and a half years, states across the country, faced
with many of the same fiscal problems as Iowa, would look to gambling as
a magic bullet to cure their economic woes. From lotteries to slot machines,
to riverboats, to full-blown casinos, state after state rushed to expand
its gambling operations. By the beginning of 1995, legal gambling in the
United States was generating over $37 billion dollars in yearly revenue.

While this massive expansion has generated some controversy, most of
it has centered on the moral questions raised by the transformation of a
previously illegal activity to an officially sanctioned one. If we put aside
these important considerations, however, and focus on hard, economic truths,
a new set of questions arises – ones that have less to do with gambling
per se, and more to do with the wisdom of placing the future of our communities
in the hands of panicked lawmakers and a politically savvy gambling industry
with massive lobbying resources at its command.

The simple fact is that there is not one example in America today of
a popularly based movement for more gambling. In fact, in those few instances
when voters have been given the chance, in state-wide elections, they have
usually rejected casino and riverboat plans. The drive to expand has instead
come almost entirely from legislators in search of a quick economic fix
that doesn’t involve raising taxes. Gambling has spread in a copy-cat pattern
with lawmakers adopting and “if we don’t our neighbors will” mentality;
within a year of Iowa’s historic riverboat opening, both Illinois and Mississippi
had legalized their own riverboats, with looser regulations, in an attempt
to lure away the new Iowan bettors.

In their haste, politicians and other leaders have relied on incomplete
and slanted research – often prepared by the gambling industry or its consultants
– about the impact their new operations will have on the existing economics
of their communities. The United States Gambling Study, which I was directed,
looked at 14 such reports and found that time and again benefits were exaggerated
and costs greatly underestimated.

These hidden costs are all the more insidious because they occur over
time and do not attract the same media fanfare that the ribbon cutting at
a new casino does. Chief among them is the effect new gambling operations
have on existing businesses. As more opportunities to gamble appear, states
and communities have to increasingly rely on their own citizens to keep
revenues up. Rather than bringing dollars in, this localized form of “convenience”
gambling simply drains the local consumer spending from local movie theaters,
bowling alleys, restaurants and retail stores and cannibalizes the local
economy. To choose one example: the number of independently owned restaurants
in Atlantic New Jersey before casinos were legalized there was 243; ten
years later there were 146.

“Get it straight,” Steve Wynn, C.E.O of Mirage Casinos told
a Bridgeport, Connecticut audience in 1992, dispelling the myth of coattail
casino economics. “there is no reason on earth for any of you to expect
for more than one second that just because there are people here, they’re
going to run into your store, or restaurant, or bar… It is illogical to
expect that people who won’t come to your restaurants or stores today will
go to your restaurants and stores just because we happen to build this building
here.”

Another major hidden cost results from the inevitable increase in compulsive
gambling behavior, including an increased burden on the criminal justice
system which is suddenly forced to deal with a flood of bad check writers
and other white collar criminals. Leaving aside the devastating personal
tragedies which attend a gambling addiction, it has been estimated that
each problem gambler costs his or her state over 13,000 per year in private
and public costs.

A report by the Wisconsin Policy Research Institute says its most conservative
estimate of the social costs of casino in that state are now $160 million
per year. And in Iowa, where the chairman of the state’s gambling commission
once described the introduction of riverboats as important as the Bill of
Rights and the Magna Carta, problem gambling has also boomed. According
to a recent Iowa Department of Human Service Study, compulsive and pathological
gambling more than tripled in the four years since Howard Keel rolled the
dice.

Compounding these problems is the fact that the decision to legalize
gambling, once made, is a very difficult one to unmake. New ventures create
instant constituencies which are prepared to fight to keep them alive, governments
also quickly grow addicted to the initial surge of revenues their new operations
bring in. Once the novelty wears off or as a neighbor state introduces a
competing gambling operation – lawmakers are forced to look to new and “harder”
forms of gambling or to looser regulations in an effort to keep their budgets
afloat. As government finds it increasingly necessary to hard-sell gambling
to the public, it makes the transition from regulator of gambling to its
biggest promoter. In effect government becomes a predator on its own citizens.
Legislators and community leaders are now finding themselves in a relationship
with gambling that goes far beyond anything they originally intended.

There is no denying that state and local governments face a real economic
crisis as we move into the next century, and nobody can fault them for searching
out new ways to relieve the economic burden placed on their citizens. But
the question is this: Do we really want the keepers of the public trust
to actively promote enterprises which take disproportionately from those
who can afford it least, are potentially addictive, and do great damage
to existing economies? We should insist that our elected officials show
more creativity and less panic in choosing their approaches to economic
development.

Why Government and Gambling Operators
Should Not Become Partnersby Robert Goodman and Stephen J. Simurda

The news that city officials are lax in enforcing regulations governing
San Jose’s two cardrooms is troubling. But even more disturbing is the implication
that the city has become so dependent upon its cardroom money (estimated
to be $13 million in 1997) that there’s no real incentive to protect its
citizens be effectively overseeing high-stakes gambling.

It’s disturbing, but it shouldn’t be surprising. The fact is, state and
city governments across the country have found themselves moving in the
same direction. Not long ago, it was organized crime that operated as a
partner to gambling ventures, ranging from Las Vegas casinos to the numbers
games run on the streets of most big American cities.

Today, government has taken on that partnership role, even while it is also
supposed to regulate those same gambling operations it has become dependent
upon. For many governments, these partnership arrangements have come to
eclipse the regulator role. That’s why betting limits do not appear to be
enforced properly at San Jose’s cardrooms, and why the cardrooms seem to
be taking excessive cuts from the games. Close regulation, after all, only
serves to lower a government’s take of the pot.

When riverboat casinos were introduced in Iowa a few years ago, the reasonable
folks out there did not want high-stakes gambling, so they decided to enforce
a $5 betting limit on all games. People can gamble, Iowans were saying,
but they should have to work real hard to lose their shirt. The problem
was that soon after new casinos, without betting limits, opened in nearby
Illinois, the Iowa betting limits were scrapped in order to prop up gambling
revenues. Problem gambling in Iowa has more than tripled since the riverboats
opened.

In Ledyard, Connecticut, the Foxwoods casino, run by the Mashantucket Pequot
tribe, is the largest in the western hemisphere. As the result of an agreement
to pay the state a percentage of slot machine profits, the casino has contributed
hundreds of millions of dollars to the state economy since opening in 1992.
But, as The Connecticut Law Tribune reported, in its first two-and-a-half
years the casino racked up a long list of alcohol violations, all detailed
by the state Department of Liquor Control. But the penalties amount to less
than $7,000 in total fines and not a single license suspension, despite
serving more than 200 underage drinkers. If the casino was shut, even for
a day, the state would lose roughly half a million dollars in slot profits.

In Atlantic City, New Jersey, the same imperative to maintain gambling revenues
led to massive changes in casino relations designed to protect the public.
New Jersey’s original regulations prohibited twenty-four hour gambling,
restricted the number of slot machines (considered to be one of the most
addictive forms of gambling) and outlawed some games entirely. But as the
threat of new casinos in nearby states increased in the early 1990’s, these
restrictions were dropped. Today, New Jersey is in the process of encouraging
a massive expansion of its casino industry, in the hope of generating even
bigger revenues for the state treasury.

What it all means is that the proliferation of legalized gambling is probably
the only situation where government has gotten itself into a position not
simply of legalizing a potentially harmful activity, but of actually encouraging
it. Gambling ventures are not being legalized in response to popular demands
for more chances to play blackjack or Pai Gow. This is not like the repeal
of Prohibition, where the government responded to a popular demand to legalize
the sale of liquor.

Governments have long explicitly tried to get people to gamble more by
promoting state lotteries with slick advertisements and unrealistic hopes
of big jackpots. But now they also do it by entering into lucrative partnership
arrangements with private gambling businesses that ensure a steady flow
of profits to the operator and the government partner, but virtually eliminate
the regulator role that only government can play to protect the public from
abuses.

The result has been a dangerous shift in the fundamental role of government
from regulator to promoter. Regulations designed to protect the public are
being gutted or ignored, while millions of people are being recruited into
gambling who have never gambled before.

In its new promotional role, government finds itself in a classic conflict
of interest. While it once monitored gambling closely in order to guard
against operators who might take advantage of its citizens, government dependence
on gambling revenues now puts pressure on state and local officials to look
the other way on regulation. This stands in stark contrast to government
direction, especially since the 1930’s, as protector of its citizens through
laws and regulations designed to safeguard workplace conditions, health
and safety, the environment, civil rights, and long-term economic security.

As far back as the 1950’s, politicians argued that by legalizing gambling,
governments would capture money which was already being bet illegally, eliminate
the role of organized crime, and insure that players weren’t being cheated.
Yet criminals never promoted their gambling operations the way governments
now promote theirs through multi-million-dollar advertising campaigns, public
relations efforts, and focus groups, all conducted to encourage more people
to gamble. Along the way, government gambling operations have become so
entrenched, and blindly accepted, that they receive extensive free publicity
through newspaper and TV stories about winning numbers, incredible jackpots,
happy winners and transformed lives.

From a psychological perspective, people’s ability to dream and to hope
for a better life can be a very healthy and useful human attribute. It helps
them persevere under difficult circumstances, and it motivates people to
change and improve their lives. But by enticing people to spend their money
on fantasies, governments are preying on people’s ability to dream and hope.

Rather than providing real hope for economic improvement, public officials
who take a laissez faire attitude toward betting limits and other regulatory
matters are becoming deeply involved in finding new ways of manipulating
people’s ability to hope. They are enticing people to take part in what
should properly be called a pathology of hope. At this point, government
has crossed over from not only being a promoter of gambling to being a predator
on its own citizens.

For every player who loses $10,000 on a hand of Pai Gow, the city treasury
gets its cut. It seems a sure bet for the city treasury, but it’s a bad
one for those who must live with the consequences of legalized gambling
run amok. Excessive gambling losses end up costing communities in innumerable
ways, ranging from the effects of personal bankruptcies, divorce, domestic
abuse, white-collar crime, and a host of other unfortunate social consequences.
New gambling also inevitably sucks money away from other businesses in a
community.

If someone loses $10,000 on a hand of Pai Gow, the government’s response
should be to use the regulations in place to punish those who break the
law and to prevent this from happening in the future. When government abandons
its will to protect its people, everyone loses.